Capital market (Insolvency) meaning

Checklist This Checklist applies when acquiring a long leasehold interest carrying a capital value, rather than a shorter tenancy at an open market rent, which is unlikely to attract any capital value. A purchaser’s solicitor should examine the landlord’s right to forfeit the lease, as in some situations particular forfeiture clauses can render a lease unacceptable as security to a lender and, in turn, unsuitable for purchase. Could the landlord exercise forfeiture upon the tenant’s insolvency? Where the landlord holds a right to forfeit on a tenant insolvency event, the property will not be acceptable security to a lender and is therefore inappropriate as an investment acquisition. Consequently, such a lease is neither appropriate for lending purposes nor for any purchase...

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In this issue: UK, EU and international regulators and bodies Authorisation, approval and supervision Prudential requirements Financial stability Risk management and controls Financial crime and sanctions Consumer protection Investigations, enforcement and discipline PRIIPs Regulation of derivatives Banks and mutuals Sustainable finance and ESG Investment funds and asset management Consumer credit, mortgage and home finance Regulation of insurance Regulation of personal pension and stakeholder products Payment services and systems Spring Budget 2024 EEA Agreement Annex IX (Financial Services) Daily and weekly news alerts New and updated content Dates for your diary UK, EU and international regulators and bodies FCA sets out business plan for 2024–25 and outlines its approaches to supervision, consumers, international firms and competition The Financial Conduct Authority (FCA) has released its business plan for 2024–25—the concluding year of its three-year strategy aimed at delivering improved outcomes for consumers and...

Re Sova Capital Ltd (company number 04621383) (in special administration) [2023] EWHC 452 (Ch), [2023] All ER (D) 24 (Mar) Background to Sova and the Special Administration Sova, authorised by the Financial Conduct Authority (FCA), operated as an investment brokerage firm. It acted for institutional counterparties, with its trading largely focused on the Russian market. Following the upheaval in markets triggered by Russia’s invasion of Ukraine, the firm encountered acute liquidity pressures, prompting its directors to seek an English Court order placing it into special administration under the Investment Bank Special Administration Regulations 2011, SI 2011/245 (the IBSA Regulations). The business oversaw assets totalling several billions of pounds sterling across its client assets sourcebook (CASS) structures—covering client money and custody assets—as well as its own house book. The IBSA Regulations were introduced to tailor the insolvency framework for investment businesses like Sova, drawing on the experience of the Lehman administration. Background to the Transaction Given its role as a broker in the Russian arena, 87% of...

Loan market and developments Please provide a succinct outline of the current condition of the loan markets in your jurisdiction and any noteworthy recent developments. The US corporate loan market remains a significant pillar of the US economy. While the US loan market has undergone considerable change in recent years, it is still resilient and continues to be one of the most inventive and consequential areas within the US capital markets. Two principal components of the US corporate loan space are broadly syndicated loans (BSL) and private credit transactions. The BSL segment is a key funding source for medium- and large-sized companies, comprising loans where multiple banks and non-bank financial institutions extend finance through a syndicate of lenders. Private credit typically involves lending by non-bank lenders on a bilateral basis or by a small cadre of lenders (often termed ‘club deals’). Both segments have seen strong growth and transformation over the past several years. Broadly Syndicated Loans Although private credit often captures more media focus, syndicated lending...

Role The role of credit rating agents (CRAs) is to deliver an independent, analytical view of the likelihood of payment default, by assessing multiple factors that guide investors on whether to commit to specific securities. Capital market investors are highly sensitive to risk, and some are constrained by their internal constitutional documents from investing in lower grade instruments. As a rule, the greater the investment risk, the higher the return (interest/coupon) demanded by investors. Ratings may apply to both the company issuing the instruments and the instruments themselves. An issuer’s debt can be rated apart from the issuer, for example where the issuer is a special purpose vehicle created solely for the issuance, or where the debt benefits from credit enhancements (eg a guarantee) that lift it above the issuer’s own standing rating. For example, the following can be rated: the issuer senior debt/syndicated loans medium term notes (MTNs) commercial paper (CP) fixed income securities sovereign debt residential mortgage...

Rationale Securitisation is the transfer of sizeable portfolios of income‑generating assets to a special purpose vehicle (SPV). The SPV finances the purchase price by issuing interest‑bearing securities—commonly termed ‘bonds’ or ‘notes’—into the capital markets. These securities benefit from security over the assets and/or the cashflows they produce (the ‘receivables’). Cashflows from the receivables are applied to pay interest and to repay principal on the securities. Types of receivables that can be securitised include: mortgage payments bank loan repayments lease/rental payments credit card repayments insurance premium payments Benefits of securitisation include: cheaper borrowing—the SPV may achieve a higher credit rating than the debtor company (originator). Either the obligors for the receivables carry a stronger rating than the originator, or credit rating agencies may find it simpler to rate a single asset (the receivables) rather than the originator, which presents more variables...